Annual report pursuant to Section 13 and 15(d)

Long-Term Debt

v3.10.0.1
Long-Term Debt
12 Months Ended
Dec. 31, 2018
Debt Disclosure [Abstract]  
Long-Term Debt
Long-Term Debt
The following table summarizes our long-term debt as of the dates presented:
 
December 31, 2018
 
December 31, 2017
 
Principal
 
Unamortized Discount and Issuance Costs 1
 
Principal
 
Unamortized Discount and Issuance Costs 1
Credit facility 2
$
321,000

 
 
 
$
77,000

 
 
Second lien term loans
200,000

 
$
9,625

 
200,000

 
$
11,733

Totals
521,000

 
9,625

 
277,000

 
11,733

Less: Unamortized discount
(3,159
)
 
 
 
(3,839
)
 
 
Less: Unamortized deferred issuance costs
(6,466
)
 
 
 
(7,894
)
 
 
Long-term debt, net
$
511,375

 
 
 
$
265,267

 
 

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1 Discount and issuance costs of the Second Lien Facility are being amortized over the term of the underlying loan using the effective-interest method.
2
Issuance costs of the Credit Facility, which represent costs attributable to the access to credit over its contractual term, have been presented as a component of Other assets (see Note 13) and are being amortized over the term of the Credit Facility using the straight-line method.
Credit Facility
On the Emergence Date, we entered into the Credit Facility. The Credit Facility provides for a $450.0 million revolving commitment and borrowing base and a $5 million sublimit for the issuance of letters of credit. On October 26, 2018, we entered into the Master Assignment, Agreement and Amendment No. 5 to the Credit Facility (the “Fifth Amendment”) whereby the borrowing base was redetermined from $340.0 million to $450.0 million. In the years ended December 31, 2018 and December 31, 2017, we paid and capitalized issue costs of $0.9 million and $1.7 million, respectively in connection with amendments to the Credit Facility and wrote-off $0.8 million during 2017 of previously capitalized issue costs due to changes in the composition of financial institutions comprising the Credit Facility bank group associated with that amendment. The availability under the Credit Facility may not exceed the lesser of the aggregate commitments or the borrowing base. The borrowing base under the Credit Facility is generally redetermined semi-annually in April and October of each year. Additionally, the Credit Facility lenders may, at their discretion, initiate a redetermination at any time during the six-month period between scheduled redeterminations. The Credit Facility is available to us for general corporate purposes including working capital. The Credit Facility matures in September 2020. We had $0.4 million and $0.8 million in letters of credit outstanding as of December 31, 2018 and December 31, 2017, respectively.
The outstanding borrowings under the Credit Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate plus an applicable margin ranging from 2.00% to 3.00%, determined based on the average availability under the Credit Facility or (b) a customary London interbank offered rate (“LIBOR”) plus an applicable margin ranging from 3.00% to 4.00%, determined based on the average availability under the Credit Facility. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on LIBOR borrowings is payable every one, three or six months, at the election of the borrower, and is computed on the basis of a year of 360 days. As of December 31, 2018, the actual interest rate on the outstanding borrowings under the Credit Facility was 5.96%. Unused commitment fees are charged at a rate of 0.50%.
The Credit Facility is guaranteed by us and all of our subsidiaries (the “Guarantor Subsidiaries”). The guarantees under the Credit Facility are full and unconditional and joint and several. Substantially all of our consolidated assets are held by the Guarantor Subsidiaries. The parent company has no material independent assets or operations. There are no significant restrictions on the ability of the parent company or any of the Guarantor Subsidiaries to obtain funds through dividends, advances or loans. The obligations under the Credit Facility are secured by a first priority lien on substantially all of our assets.
The Credit Facility requires us to maintain (1) a minimum interest coverage ratio (adjusted earnings before interest, taxes, depreciation, depletion, amortization and exploration expenses as defined in the Credit Facility (“EBITDAX”) to adjusted interest expense), measured as of the last day of each fiscal quarter, of 3.00 to 1.00, (2) a minimum current ratio (as defined in the Credit Facility, which considers the unused portion of the total commitment as a current asset), measured as of the last day of each fiscal quarter of 1.00 to 1.00, and (3) a maximum leverage ratio (consolidated indebtedness to EBITDAX), measured as of the last day of each fiscal quarter, of 3.50 to 1.00.
The Credit Facility also contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens and indebtedness, merger, consolidation or sale of assets, payment of dividends, and transactions with affiliates and other customary covenants.
As of December 31, 2018, and through the date upon which the Consolidated Financial Statements were issued, we were in compliance with all of the covenants under the Credit Facility.
Second Lien Facility
On September 29, 2017, we entered into the $200 million Second Lien Facility. We received net proceeds of $187.8 million from the Second Lien Facility net of an original issue discount (“OID”) of $4.0 million and issue costs of $8.2 million. The proceeds from the Second Lien Facility were used to fund the Devon Acquisition and related fees and expenses. The maturity date under the Second Lien Facility is September 29, 2022.
The outstanding borrowings under the Second Lien Facility bear interest at a rate equal to, at our option, either (a) a customary reference rate based on the prime rate plus an applicable margin of 6.00% or (b) a customary LIBOR rate plus an applicable margin of 7.00%. As of December 31, 2018, the actual interest rate of outstanding borrowings under the Second Lien Facility was 9.53%. Amounts under the Second Lien Facility were borrowed at a price of 98% with an initial interest rate of 8.34% resulting in an effective interest rate of 9.89%. Interest on reference rate borrowings is payable quarterly in arrears and is computed on the basis of a year of 365/366 days, and interest on eurocurrency borrowings is payable every one or three months (including in three month intervals if we select a six month interest period), at our election and is computed on the basis of a 360-day year. We have the right, to the extent permitted under the Credit Facility and an intercreditor agreement between the lenders under the Credit Facility and the lenders under the Second Lien Facility, to prepay loans under the Second Lien Facility at any time, subject to the following prepayment premiums (in addition to customary “breakage” costs with respect to eurocurrency loans): during year one, a customary “make-whole” premium; during year two, 102% of the amount being prepaid; during year three, 101% of the amount being prepaid; and thereafter, no premium. The Second Lien Facility also provides for the following prepayment premiums in the event of a change in control that results in an offer of prepayment that is accepted by the lenders under the Second Lien Facility: during years one and two, 102% of the amount being prepaid; during year three, 101% of the amount being prepaid; and thereafter, no premium.
The Second Lien Facility is collateralized by substantially all of the Company’s and its subsidiaries’ assets with lien priority subordinated to the liens securing the Credit Facility. The obligations under the Second Lien Facility are guaranteed by us and the Subsidiary Guarantors.
The Second Lien Facility has no financial covenants, but contains customary affirmative and negative covenants, including as to compliance with laws (including environmental laws, ERISA and anti-corruption laws), maintenance of required insurance, delivery of quarterly and annual financial statements, oil and gas engineering reports and budgets, maintenance and operation of property (including oil and gas properties), restrictions on the incurrence of liens and indebtedness, merger, consolidation or sale of assets and transactions with affiliates and other customary covenants.
As illustrated in the table above, the OID and issue costs of the Second Lien Facility are presented as reductions to the outstanding term loans. These costs are subject to amortization using the interest method over the five-year term of the Second Lien Facility.
As of December 31, 2018, and through the date upon which the Consolidated Financial Statements were issued, we were in compliance with all of the covenants under the Second Lien Facility.